The Pakistan Institute of Development Economics (PIDE) has issued a strong call for urgent tariff reforms to boost Pakistan’s exports and enhance industrial competitiveness. A new policy report, authored by Dr Uzma Zia, Senior Research Economist at PIDE, highlights that the country’s protectionist and overly complex tariff regime is costing billions of rupees annually, inflating production costs, and discouraging efficiency in export-oriented sectors.
The study, titled “Rationalizing Pakistan’s Tariff Regime for Export-Led Growth,” warns that Pakistan’s current system, dominated by Regulatory Duties (RDs), Additional Customs Duties (ACDs), and exemptions under the 5th Schedule, has long shielded inefficient industries and distorted market signals. According to the report, this structure burdens both manufacturers and consumers, limits competitiveness, and entrenches the country in a cycle of high production costs and trade imbalances.
“Every additional year under the current tariff system slows export growth, raises production costs, and deepens the trade deficit. Pakistan can no longer afford this inefficiency,” Dr Zia emphasized during the report release.
The upcoming National Tariff Policy (NTP) 2025-30 provides a roadmap for reform, aiming to phase out ACDs within four years and RDs within five, while transitioning products from the 5th Schedule to the 1st Schedule. PIDE projects that, if implemented effectively, these reforms could increase exports by 10-14%, reduce input costs, strengthen industrial competitiveness, and alleviate inflationary pressures.
Among the key recommendations, PIDE proposes a rationalization of customs duties from five slabs to four—0%, 5%, 10%, and 15%—within five years, along with a complete phase-out of tariff peaks exceeding 20%. Duties should also be harmonized by product type, with raw materials carrying the lowest rates, intermediates moderate rates, and consumer goods the highest, promoting industrial upgrading and investment in high-value sectors.
The report also addresses the auto sector, urging alignment of tariffs under the Automotive Industry Development and Export Plan (AIDEP 2021–26). Measures include duty reductions, removal of ACDs and RDs, and controlled import of used vehicles under strict quality and environmental standards to encourage competitiveness and consumer choice.
While the study acknowledges potential resistance from protectionist industries and risks from external shocks like commodity price volatility and exchange rate fluctuations, it emphasizes that the cost of inaction is far greater, resulting in stagnant exports, missed investment opportunities, and persistent consumer hardship.
PIDE concludes that Pakistan is at a pivotal juncture: embracing tariff rationalization and aligning trade policy with global competitiveness can transition the country from revenue-driven protectionism to sustainable, export-led growth. “Tariff reform is not just an economic necessity—it is a national imperative,” Dr Zia affirmed, underscoring the urgency of simplifying tariffs, eliminating distortions, and pursuing policies aligned with long-term economic growth.
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